One way to trade using ADX is to wait for breakouts first before deciding to go long or short.
They can use ADX as confirmation of whether the pair could continue in its current trend or not.
Another way is to combine ADX with another indicator, particularly one that identifies whether the pair is headed downward or upwards.
ADX can also be used to determine when one should close a trade early.
For instance, when ADX starts to slide below 50, it indicates that the current trend is losing steam.
From then on, the pair could move sideways, so you might want to lock in those pips before that happens.
As the saying goes, “The trend is your friend.”
Until it stabs you in the back.
I mean…” Until it reverses.”
(Got caught up in memories for a moment there.)
The next time you think a trend is changing and decide whether to stick to this “friend” or cut ties, consider trying the ADX to confirm the trend’s strength.
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